All Forum Posts by: Brittany Minocchi

Depends on whether you're talking about conventional or nonQM financing. Sometimes lenders can do what's called a "float down", where they can adjust your rate if rates have dropped enough (enough being the key here). Usually you need a decrease of .25%+ for that to work. Or if the person you're working with is a broker, and the original lender doesn't offer that option, they can take your file to another investor. Not something I generally like to do because it can hurt the relationship there, but at the end of the day, gotta do right by your borrower. 

Anything you see online can give you an idea, but it can never be 100% accurate. Too many factors go into determining someone's rate, and what you find online will likely just tell you what direction people THINK rates are headed, and national averages. 

Hey Seth - 

Since the property is in Michigan, I'm going to assume your loan amount would be on the lower end...make sure you check out the minimums for any lenders you speak with. Many commercial properties (5+ units) have a $250-$400k minimum, so that may be a hurdle. I'm in Ohio and that's something I run into a lot with my borrowers. You'll also want to make sure you have at least 5 of the 6 units rented out, a 70% minimum occupancy is pretty standard and they may require that it's been at that level of occupancy for a certain length of time. One of my lenders will go down to a $100k loan amount, but you have to maintain 70% occupancy for at least 90 days. DSCR will probably need to be around 1.1-1.2 at a minimum, and 70-75% LTV is common depending on credit.

Hopefully that helps a bit, feel free to connect if you have any questions!

Hey Chad - 

Not sure if you're still looking, figured I'd post for you and anyone else that comes across your post...80% LTV is an option with no seasoning if you've completed verifiable rehab to justify using the appraised value over purchase price. This is a good fit for someone who completed a substantial amount of work, but not someone who purchased below market, threw in some flooring and painted. You'll see a higher rate with 80% vs 75% and the max LTV limits may vary by state. As of now, AL is eligible for 80%. Both ARM and 30 year fixed are options.

 Hello! The occupancy requirement would be to qualify for the loan initially, not a stipulation for any set period of time.  

Haven't used one personally, but I've helped a lot of people get them. If you need to close in an LLC, don't want to (or can't) provide income docs like tax returns, paystubs, W2s, etc., don't have a great employment history or are self-employed, DSCR is a great option. Income is based off of the property, not the borrower and DTI is not a factor. FICO of the borrower is important.

Downsides are rate is usually a bit higher than conventional (but it's worth mentioning that conventional investment loans typically require points which increases closing costs, not always the case with DSCR), closing costs can be higher and there are usually prepayment penalties. Conventional limits you to 10 properties, many lenders don't have a limit for DSCR.

People who use the BRRRR method usually refinance into a DSCR loan, but that's not the only scenario it works with. Happy to discuss further, feel free to connect!

It's possible, but there aren't many lenders that'll go below a $75k loan amount on a single property. I only know of one that goes down to $50k, but fees end up around $5-$6k before title and escrows which can be prohibitive to some. You'll also need anywhere from 20-30% down depending on credit. 

Once your rehab is completed, you could take a look at a cash out refinance on that property and use the funds to acquire this other property. 

You CAN transfer title to an LLC, but the loan could be called due. If you're purchasing conventionally, Fannie/Freddie don't allow you to close in an LLC but there are other options that do allow it. Rate and cost for those types of business-purpose loans will be a bit higher compared to conventional. I also know of one lender (assuming their rules haven't changed) that will allow you to quitclaim to your LLC with no repercussions after 90 days. The downside is that their minimum loan amount is on the high side at $200k. This is problematic for investors here in OH specifically because of our lower cost of entry.

Hey Jake - 

Many folks are choosing to invest in areas like Cleveland, Columbus Cincinnati, Dayton, Toledo, Akron and Canton. Are you looking for turn key properties to properties in need of rehab? What class of neighborhood? Single family or multi? I personally am local to and invest in Canton, primarily small multifamily in C/D class neighborhoods with good cash flow. You've really gotta screen your tenants, though. Section 8 is another avenue you could explore. Happy to talk if you'd like to connect. 

 Hi Minie, 

Many folks are choosing to invest in areas like Cleveland, Columbus Cincinnati, Dayton, Toledo, Akron and Canton. It depends on what you're looking for (cash flow, appreciation, price point, turn key, rehab needed, etc). I personally am local to and invest in Canton. Happy to talk if you'd like to connect. 

That's correct, most lenders do calculate income based on the entire property as a long term rental...is it possible that you could find a property where this isn't an issue? I'm sure your income would be higher renting by the room vs renting the whole home, but as long as there are comps to support a value high enough for a DSCR ratio of 1.00+, you should be in the clear. So for instance, maybe you have a 4 bedroom home you can rent for $600/room. That's $2400/mo. As long as your monthly PITI(A) on that property is $2400/mo max, you're good. Qualifying for the lowest rate possible and putting a large down payment are a couple of ways to navigate the potential ratio issue and get closer to the number you need to make it work.

Also depends on the term - will you have 12-month leases in place for each room? If so a lender may be more open to that. I hope that helps, feel free to connect!